1. Field of the Invention
The present invention relates generally to the field of computerized fiscal bookkeeping and more particularly to a system and method for transferring assets from a particular set of depreciation books to another.
2. Description of the Prior Art
It is well known in the field of accounting for companies to depreciate assets for tax purposes. An asset can be anything of value owned by the company. The United States Internal Revenue Service (through laws enacted by Congress) determines exactly what assets can be depreciated. Other countries also may allow depreciating an asset. Depreciating means reducing the value of an asset each year according to a particular formula.
It is also well known to keep records of depreciating assets in computer databases such as the Oracle Assets System supplied by Oracle Corporation of Redwood Shores Calif. Records of depreciating assets are generally kept in database entries called depreciation books (exactly as physical books were kept before computerized accounting). Each depreciating asset is entered into one of these books (which are part of a relational database) along with various parameters such as its identification in the system (asset number, asset description, serial number, tag number, etc.), parameters about what type of asset it is and how it should be depreciated (asset category) and various other information relating to the asset.
Generally, companies maintain many different asset books, with different parts of the same company maintaining asset books in different databases and in different countries. A major problem arises when a particular asset must be transferred from one asset book to another. The problem is difficult when the asset is transferred between books in a single country; the problem becomes extremely difficult when an asset is to be transferred between books maintained in two different countries with different currencies.
Presently, transferring of an asset from one depreciation book to another is a manual process. This process requires manual interaction with several databases and is very error prone because of the numerous manual steps. Unfortunately, it is a daily occurrence in many multi-national companies.
The first step of the current process is to determine the asset or assets that will be transferred. The assets department of a company must make this determination based on information received from the field. Usually an asset number, asset description, serial number, tag number, asset key or other identifying feature of the asset is supplied to the assets department. The first task is thus finding the asset in the correct depreciation book. To manually access books in the Oracle Asset System, the user must be trained to use the Asset Workbench. This is a user interface and set of tools for manual use of the database. Other databases have similar interfaces.
After the asset is manually identified in the correct asset book, the asset must be retired. This means that the user must issue manual commands to remove the asset from the old depreciation book. Once the asset is removed from the old book, it is “floating”—i.e. not in any book. If for some reason it is not entered into a new book, it will become lost to the system. It is estimated that large companies have numerous assets that have become lost to the system because of human error.
After the asset is retired from the current depreciation book, it must be manually entered into the new depreciation book. Depending on the type of asset, there may be different ways it can be entered. The human operator must determine if only the asset cost is to be transferred, only the net book value (NBV) or if the cost, year-to-date depreciation and accumulated depreciation should be carried over. The human must also determine if the asset should be placed on the new book to amortize the NBV or not.
Before any values or costs can be transferred, the asset must be translated from the original currency to the new currency associated with the new depreciation book if it is in a foreign country. Therefore, the human operator must gather the currency type of the asset in the old book and determine the currency type of the new book. Then, the translation rate for the two currencies for the date of transfer must be determined. With Oracle databases, the translation rates are normally housed in the Oracle General Ledger. The asset department must usually either log into the General Ledger system or have someone with access get the required translation rate. Once the translation rate is determined, the human operator must calculate the values required for the transfer (i.e. cost, NBV, year to date depreciation, accumulated depreciation, etc.) in the new currency. This is another source of error where the new values are calculated wrong or the wrong translation rate is used.
The human operator must then add the asset to the new depreciation book. Normally this is done with some type of “create asset:” command along with the entering of the required information. If the asset is added to the new book with wrong data (wrong numbers), the error generally cannot be detected.
As a final step, the human operator must create journal entries for the entire process (journal entries are part of standard accounting procedure used to credit and debit various accounts). For the old depreciation book (asset retirement), there must normally be a debit of the Inter-Company Receivables and a credit to the Gain and Loss accounts. For the new depreciation book (asset addition), there must be a debit of the Asset Clearing Account, a credit of the Inter-Company Payables and a Credit to the Accumulated Depreciation.
In the prior art manual process just described there is no continuity of the audit trail for the asset—in fact, the audit trail is completely lost. The old audit trail ends when the asset is retired from the old book, and a new separate audit trail begins when the asset is created in the new book. From the point of view of tracking, the asset is totally lost from one set of books and a brand new asset is added to another set of books. It is currently almost impossible to check that there was no human error (or fraud) in the transfer.
It would be advantageous to have an automated system and method for transferring an asset from one depreciation book to another. This system and method would remove all of the human operator steps from the above process and run checks to make sure that all the steps are correctly performed. The system and method would virtually eliminate the possibility of human error or fraud from the process as well as providing back-up in case of computer failures as well as generated reports documenting the transfer. The automated system and method would maintain the audit trail.